- Enters into Sale Agreements for Enterprise Solutions Business with
Avaya for US$475 million
- Sale of Businesses is Best Path for Nortel to Maximize Value While
Preserving Innovation, Customer Relationships and Jobs to Greatest
Extent Possible
- Focus on Customers Continues Across all Businesses with Customer
Service Levels at Multi-year Highs
TORONTO, ONTARIO--(Marketwire - July 20, 2009) - Nortel(1) Networks
Corporation (OTCBB: NRTLQ) today announced that it, its principal
operating subsidiary Nortel Networks Limited (NNL) and certain of its
other subsidiaries, including Nortel Networks Inc. and Nortel
Networks UK Limited, have entered into a "stalking horse" asset and
share sale agreement with Avaya Inc. (Avaya) for its North American,
Caribbean and Latin America (CALA) and Asia Enterprise Solutions
business; and an asset sale agreement with Avaya for the Europe,
Middle East and Africa (EMEA) portion of its Enterprise Solutions
business for a purchase price of US$475 million. These agreements
include the planned sale of substantially all of the assets of the
Enterprise Solutions business globally as well as the shares of
Nortel Government Solutions Incorporated (NGS) and DiamondWare, Ltd.
Commenting on the announcement, Nortel President and Chief Executive
Officer, Mike Zafirovski said:
"We continue to be fully focused on running our operations and
continuing to serve our customers while actively engaged in the sale
of our businesses. We have determined that the sale of our businesses
maximizes value while preserving innovation platforms, customer
relationships and jobs to the greatest extent possible. The CDMA and
LTE Access stalking horse asset sale agreement announced on June
19th, and today's agreements around our Enterprise business are solid
proof of that value. This represents the best path forward, and we
are advancing in our discussions with interested parties for our
other businesses."
"The many customers I have spoken with have been highly supportive of
our efforts and transparency throughout this process. They value our
employees and technology platforms and are appreciative of our
service levels which are at multi-year highs."
"Today's agreements underscore the value of Enterprise Solutions and
the investments we have made in enterprise telephony, unified
communications and data networking core competencies. If successfully
completed, this transaction will provide clarity on the path forward
for our Enterprise customers, partners and employees, and enable the
industry to continue to benefit from Nortel-created technology,
know-how and leading-edge innovation."
"We have some of the best talent in the industry and will explore all
potential opportunities for them as we move through this process."
In EMEA any impact on the Enterprise Solutions workforce in
connection with this proposed transaction will be considered as part
of any required information and consultation process with employee
representatives or employees.
Joel Hackney, President, Enterprise Solutions added: "The successful
buyer will gain access to an industry-leading portfolio that is
optimized for real-time communications, bringing speed and simplicity
to customers' network environments and allowing them to enhance
collaboration, streamline business processes and improve
productivity."
Hackney continued: "Enterprise Solutions has strong relationships
with key customers and partners around the world, and we have helped
them achieve industry-leading differentiation and competitive
advantages. We remain committed to serving them without interruption
through this process and, as we move forward, we pledge to
communicate our progress to the greatest extent possible."
Chuck Saffell, Chief Executive Officer of Nortel Government
Solutions, said: "Nortel Government Solutions has built a robust
product and services business for U.S. Federal government customers.
If successfully concluded, this agreement will offer Avaya the
opportunity to continue to grow this business and bring further value
to customers."
Details of Sale Process
Nortel will file the stalking horse asset and share sale agreement
with the United States Bankruptcy Court for the District of Delaware
along with a motion seeking the establishment of bidding procedures
for an auction that allows other qualified bidders to submit higher
or otherwise better offers, as required under Section 363 of the U.S.
Bankruptcy Code. A similar motion for the approval of the bidding
procedures will be filed with the Ontario Superior Court of Justice.
Following completion of the bidding process, final approval of the
U.S. and Canadian courts will be required.
In relation to the EMEA entities to which they are appointed, the UK
Joint Administrators have the authority, without further court
approval, to enter into the EMEA asset sale agreement on behalf of
those relevant Nortel entities. In some EMEA jurisdictions, this
transaction is subject to information and consultation with employee
representatives prior to finalization of the terms of sale.
In addition to the processes and approvals outlined above,
consummation of the transaction is subject to the satisfaction of
regulatory and other conditions and the receipt of various approvals,
including governmental approvals in Canada and the United States and
the approval of the courts in France and Israel. The stalking horse
asset and share sale agreement and the EMEA asset sale agreement are
also subject to purchase price adjustments under certain
circumstances.
Share Value; Certain Potential Tax Consequences of TSX Delisting
As previously announced in the Company's news release of June 19,
2009, Nortel does not expect that the Company's common shareholders
or the NNL preferred shareholders will receive any value from the
creditor protection proceedings and expects that the proceedings will
result in the cancellation of these equity interests. The Company and
NNL applied to delist their shares from trading on the Toronto Stock
Exchange (TSX) and delisting occurred on June 26, 2009 at the close
of trading.
As a result of the TSX delisting, certain sellers of Nortel shares
who are not residents of Canada for purposes of the Income Tax Act
(Canada) may be liable for Canadian tax and may be subject to tax
filing requirements in Canada as a result of the sale of such shares
after June 26, 2009. Also, purchasers of Nortel shares from
non-residents may have an obligation to remit 25% of the purchase
price to the Canada Revenue Agency. Parties to sales of Nortel shares
involving a non-resident seller should consult their tax advisors or
the Canada Revenue Agency. The statements herein are not intended to
constitute, nor should they be relied upon as, tax advice to any
particular seller or purchaser of NNC common shares or NNL preferred
shares.
About Nortel
Nortel delivers communications capabilities that make the promise of
Business Made Simple a reality for our customers. Our next-generation
technologies, for both service provider and enterprise networks,
support multimedia and business-critical applications. Nortel's
technologies are designed to help eliminate today's barriers to
efficiency, speed and performance by simplifying networks and
connecting people to the information they need, when they need it.
For more information, visit Nortel on the Web at www.nortel.com. For
the latest Nortel news, visit www.nortel.com/news.
Certain statements in this press release may contain words such as
"could", "expects", "may", "should", "will", "anticipates",
"believes", "intends", "estimates", "targets", "envisions", "seeks"
and other similar language and are considered forward-looking
statements or information under applicable securities laws. These
statements are based on Nortel's current expectations, estimates,
forecasts and projections about the operating environment, economies
and markets in which Nortel operates. These statements are subject to
important assumptions, risks and uncertainties that are difficult to
predict, and the actual outcome may be materially different. Further,
actual results or events could differ materially from those
contemplated in forward-looking statements as a result of the
following (i) risks and uncertainties relating to Nortel's Creditor
Protection Proceedings including: (a) risks associated with Nortel's
ability to: stabilize the business and maximize the value of its
businesses; obtain required approvals and successfully consummate
pending and future divestitures; successfully conclude ongoing
discussions for the sale of Nortel's other assets or businesses;
develop, obtain required approvals for, and implement a court
approved plan; resolve ongoing issues with creditors and other third
parties whose interests may differ from Nortel's; generate cash from
operations and maintain adequate cash on hand in each of its
jurisdictions to fund operations within the jurisdiction during the
Creditor Protection Proceedings; access the EDC Facility given the
current discretionary nature of the facility, or arrange for
alternative funding; if necessary, arrange for sufficient
debtor-in-possession or other financing; continue to have cash
management arrangements and obtain any further required approvals
from the Canadian Monitor, the U.K. Joint Administrators, the French
Administrator, the Israeli Joint Administrators, the U.S. Creditors'
Committee, or other third parties; raise capital to satisfy claims,
including Nortel's ability to sell assets to satisfy claims against
us; maintain R&D investments; realize full or fair value for any
assets or business that are divested; utilize net operating loss
carryforwards and certain other tax attributes in the future; avoid
the substantive consolidation of NNI's assets and liabilities with
those of one or more other U.S. Debtors;
attract and retain customers or avoid reduction in, or delay or
suspension of, customer orders as a result of the uncertainty caused
by the Creditor Protection Proceedings; maintain market share, as
competitors move to capitalize on customer concerns; operate Nortel's
business effectively in consultation with the Canadian Monitor, and
work effectively with the U.K. Joint Administrators, French
Administrator and Israeli Joint Administrators in their respective
Administration of the EMEA businesses subject to the Creditor
Protection Proceedings; actively and adequately communicate on and
respond to events, media and rumors associated with the Creditor
Protection Proceedings that could adversely affect Nortel's
relationships with customers, suppliers, partners and employees;
retain and incentivize key employees and attract new employees, as
may be needed; retain, or if necessary, replace major suppliers on
acceptable terms and avoid disruptions in Nortel's supply chain;
maintain current relationships with reseller partners, joint venture
partners and strategic alliance partners; obtain court orders or
approvals with respect to motions filed from time to time; resolve
claims made against Nortel in connection with the Creditor Protection
Proceedings for amounts not exceeding Nortel's recorded liabilities
subject to compromise; prevent third parties from obtaining court
orders or approvals that are contrary to Nortel's interests; reject,
repudiate or terminate contracts; and (b) risks and uncertainties
associated with: limitations on actions against any Debtor during the
Creditor Protection Proceedings; the values, if any, that will be
prescribed pursuant to any restructuring plan to outstanding Nortel
securities;
the delisting of NNC common shares from the NYSE; and the delisting
of NNC common shares and NNL preferred shares from the TSX; and (ii)
risks and uncertainties relating to Nortel's business including: the
sustained economic downturn and volatile market conditions and
resulting negative impact on Nortel's business, results of operations
and financial position and its ability to accurately forecast its
results and cash position; cautious capital spending by customers as
a result of factors including current economic uncertainties;
fluctuations in foreign currency exchange rates; any requirement to
make larger contributions to defined benefit plans in the future; a
high level of debt, arduous or restrictive terms and conditions
related to accessing certain sources of funding; the sufficiency of
workforce and cost reduction initiatives; any negative developments
associated with Nortel's suppliers and contract manufacturers
including Nortel's reliance on certain suppliers for key optical
networking solutions components and on one supplier for most of its
manufacturing and design functions; potential penalties, damages or
cancelled customer contracts from failure to meet contractual
obligations including delivery and installation deadlines and any
defects or errors in Nortel's current or planned products;
significant competition, competitive pricing practices, industry
consolidation, rapidly changing technologies, evolving industry
standards, frequent new product introductions and short product life
cycles, and other trends and industry characteristics affecting the
telecommunications industry; any material, adverse affects on
Nortel's performance if its expectations regarding market demand for
particular products prove to be wrong; potential higher operational
and financial risks associated with Nortel's international
operations; a failure to protect Nortel's intellectual property
rights; any adverse legal judgments, fines, penalties or settlements
related to any significant pending or future litigation actions;
failure to maintain integrity of Nortel's information systems;
changes in regulation of the Internet or other regulatory changes;
and Nortel's potential inability to maintain an effective risk
management strategy. For additional information with respect to
certain of these and other factors, see Nortel's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2009 and Annual Report on
Form 10-K for the year ended December 31, 2008 and other securities
filings with the United States Securities and Exchange Commission.
Unless otherwise required by applicable securities laws, Nortel
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
For the Companies listed below, The Institute of Chartered
Accountants in England and Wales authorises A R Bloom, S Harris and C
Hill to act as Insolvency Practitioners under section 390(2)(a) of
the Insolvency Act 1986 and the Association of Chartered Certified
Accountants authorises A M Hudson to act as an Insolvency
Practitioner under section 390(2)(a) of the Insolvency Act 1986.
The affairs, business and property of the Companies are being managed
by the Joint Administrators, A R Bloom, S Harris, AM Hudson and C
Hill who act as agents of the Companies only and without personal
liability.
The Companies are Nortel Networks UK Limited; Nortel Networks SA;
Nortel GmbH; Nortel Networks France SAS; Nortel Networks NV; Nortel
Networks SpA; Nortel Networks BV; Nortel Networks Polska SP Zoo;
Nortel Networks Hispania SA; Nortel Networks (Austria) GmbH; Nortel
Networks sro; Nortel Networks Engineering Service Kft; Nortel
Networks Portugal SA; Nortel Networks Slovensko sro; Nortel Networks
Oy; Nortel Networks Romania SRL; Nortel Networks AB; Nortel Networks
International Finance & Holding BV.
(1)Nortel, the Nortel logo and the Globemark are trademarks of Nortel
Networks.
Contacts:
Nortel
Pat Cooper
Media
(425) 450-7523
Email: pat.cooper@nortel.com
Nortel
Jay Barta
Media
(972) 685-2381
Email: jbarta@nortel.com
Nortel
Investors
(888) 901-7286 or (905) 863-6049
Email: investor@nortel.com
Website: www.nortel.com
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Copyright © Hugin AS 2009. All rights reserved.
